Hess Midstream stock reinstated at Neutral by Goldman Sachs

Investing.com - Goldman Sachs reinstated coverage on Hess Midstream Partners LP (NYSE:HESM) with a Neutral rating and a $36.00 price target on Tuesday. According to InvestingPro data, the stock appears undervalued, trading at a P/E ratio of 12.86 with a healthy 8.5% dividend yield.

The midstream company, which owns oil and gas assets supporting its new sponsor Chevron in the Bakken, has experienced share price volatility since Chevron completed its acquisition of Hess earlier this quarter. HESM stock has declined 9% compared to the Alerian Midstream Index’s 5% gain since July 17, 2025. The stock is currently trading near its 52-week low of $33.59, though InvestingPro analysis shows the company maintains strong fundamentals with a 9% revenue growth and has raised its dividend for 8 consecutive years.

Goldman Sachs notes that HESM initially performed well due to enthusiasm around Chevron’s broader scale, higher likelihood of production stability, and its track record with prior midstream entities. Sentiment later declined following a guidance cut and growth reset after Chevron announced plans to drop a rig in the Bakken.

The firm considers HESM shares fully valued, citing reset growth expectations and strong contracts that limit near-term downside, though it believes consensus estimates remain too high. Goldman Sachs also highlights compelling capital return potential given low capital expenditure needs.

The investment bank points out that Chevron’s ongoing review of its Bakken operations presents both upside and downside risks, creating uncertainty for Hess Midstream’s long-term outlook.

In other recent news, Hess Midstream has updated its financial and operational guidance following Chevron’s decision to reduce its Bakken drilling operations from four to three rigs starting in the fourth quarter of 2025. The company now projects relatively flat Adjusted EBITDA in 2026 compared to 2025, with growth expected to resume in 2027, driven by increases in gas throughput volumes and inflation escalation provisions under existing agreements. Despite the anticipated growth in gas throughput, oil throughput volumes are expected to plateau in 2026 due to the reduced rig activity.

In response to these developments, Wells Fargo downgraded Hess Midstream from Overweight to Equal Weight, lowering its price target to $39.00, citing the impact of Chevron’s rig reduction on growth prospects. UBS also downgraded the company from Buy to Neutral, adjusting the price target to $43.00, amid concerns about potential reduced drilling activity in the Bakken region. These downgrades reflect apprehensions about Hess Midstream’s future earnings estimates due to the changes in Chevron’s drilling plans.

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